China details zero tariff policy on Hainan free-trade area
The Chinese island of Hainan will collect no tariffs on products and services that promote its establishment as a free-trade port, which is targeted to be the biggest in China.
The new policy was included in a set of guidelines released by authorities on the building of a free-trade zone in Hainan province that would be spread over 35,400 square kilometers.
China has touted the free-trade zone in its south as the country’s biggest move toward deeper reforms and the opening up of its economy. The master plan for the zone was released in June last year, and details of where tariffs would be waived were revealed intermittently afterwards.
Taxes will be lowered to zero on “self-use” production equipment that will aid the development of the zone, according to the latest notice jointly issued by the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation. This will cover equipment for infrastructure construction, research and development, logistics, medical services and tourism.
All related tariffs, value-added tax and consumption tax will also be exempted.
The notice also lists a number of “negative items” whose tariffs will not be automatically waived, such as products related to coal and metal mining, and certain leather processing equipment.
Contained in the notice is a case study on how to pay less taxes. For example, imports of entertainment equipment related to theme parks will have taxes waived to the tune of 13 million yuan (US$2 million) if the total import value is 100 million yuan.
Mainland officials have denied that the creation of the massive free-trade area is part of a scheme to replace Hong Kong, which was rocked by months of political unrest and street violence in 2019.
The New York Times said in a recent editorial that it would be difficult to replace Hong Kong, which had intangible qualities such as unrestricted capital flow, freedom of information, judicial independence, an educated workforce and a lack of stringent government regulations on overseas investors.
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